purchase commitments
Definition
A purchase commitment is a binding promise you make to buy a specific amount of goods or services from a supplier at an agreed price within a set time period. Unlike a casual order, this is a legally enforceable agreement, meaning the supplier can hold you to it even if your business needs change.
Example
You sign a deal with a paper supplier agreeing to buy 10,000 reams over the next 12 months at a locked-in price, and that obligation stays on your books whether you end up needing all of it or not.
Watch Out
If your sales slow down and you can't use what you promised to buy, you may still owe the supplier the full amount or face significant penalties for backing out.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.